Unlike his foreign minister Alexander Downer who gave evidence before the inquiry on Tuesday, Mr Howard entered through the front door where he gave a brief address. He told the press that his government is being open about the Iraqi kickback affair. " just want to make one point and that is that the appearance by me, earlier this week by the Foreign Minister and also by the Trade Minister, demonstrates absolutely how open and transparent and accountable the Government is being in relation to this matter" Mr Howard said to reporters.

Mr Howard was questioned by John Agius, counsel assisting the inquiry. Counsel for AWB, the company at the centre of the scandal did not apply to cross-examine the prime minister.

Terrence Cole, the inquiry's commissioner received an application from Peter Geary and Micheal Long's counsel to cross-examine the prime minister but refused it on the grounds that the proposed line of questioning was similar to that of Mr Aguis' and that there was no evidence that Mr Howard had "ever met with Mr Geary or Mr Long".

Mr Agius questioned the prime minister about a series of diplomatic cables sent to his office, which raised concerns about AWB's contracts in Iraq.

Mr Howard told the inquiry that he doesn't recall reading or being briefed about any of the cables referred to by the inquiry. The inquiry also heard that prior to 2003 there was no system in place to identify which cables had been bought to the prime minister's attention.

In his statement to the inquiry, Mr Howard said that his office had not received four of the cables mentioned by the inquiry. Under questioning, Mr Howard confirmed this but conceded that it was likely that his staff had read the other 17.

When asked whether there were any guidelines which guided his advisors in deciding which cables should be bought to the prime minister's attention, Mr Howard replied "No, there weren't".

The inquiry heard that the only discussions about which cables which should be bought to Mr Howard's attention occurred when an advisor changed in very generic terms. Mr Howard told the inquiry that he would tell a new advisor "Well, you've got to exercise your own judgment, I can't possibly read everything, and clearly I want things brought to my attention which are, in your judgment, important and are relevant to issues in front of the government at the time".

Mr Howard admitted that the government had an interest in Iraq using the United Nations oil for food program for its own financial benefit, but said he did not expect cables dealing with alleged breach of UN sanctions to have been bought to his attention.

The questioning then turned to a statement Mr Howard made to the National Press Club on March 13, 2003, one week prior to the US-led Iraqi occupation. Speaking about Saddam Hussein Mr Howard said "He has cruelly and cynically manipulated the United Nations oil-for-food programme. He's rorted it to buy weapons to support his designs at the expense of the wellbeing of his people".

Mr Agius asked Mr Howard if his statement was based upon briefngs he had received. Mr Howard told the inquiry that the information was based upon "open source" intelligence stated at addresses by British foreign secretary Jack Straw and the United States state department. Mr Howard said one of his advisors "checked with some cables to confirm that those cables supported the open-source claims and was satisfied that they did".

Mr Howard denied seeing the cables used by the advisor to support the claims, but believed he would have told her to be sure that everything they were saying can be supported by fact. Mr Howard told the inquiry that he never knew about cables which referred to Hussein rorting the UN Oil for Food program. Mr Howard admitted that at the time his "general knowledge" was that Hussein had breached UN sanctions and was rorting the Oil for Food program.

"My general knowledge at the time and belief was that the program had been rorted, and it was not seriously in dispute. Nobody was arguing it hadn't been rorted" Mr Howard said.

The prime minister was questioned about an unassessed intelligence report which mentioned a Jordanian trucking company known as "Alia" paying kickbacks to Hussein. In response to this Mr Howard told the inquiry that he could not recall the information being bought to his attention, which was not unusual.